Joe Earle, Cahal Moran, and Zach Ward-Perkins, The Econocracy (Penguin, 2017)
Heather Boushey, J. Bradford DeLong, and Marshall Steinbaum, After Piketty(Harvard, 2017)
Economics reigns victorious. Its henchman neoliberalism has installed, according to Wendy Brown, ‘a governing rationality through which everything is ‘economized’’. Caught in a world where everyone is in search of economic benefit and constantly urged to better their economic performance, the health of the economy takes precedence. Evidently, this economization of existence betrays an obsessive desire to enumerate everything. Thinking defaults to the bottom line: what a particular object or course of action costs, and what financial return on investment is or isn’t forthcoming. In this world, ‘money’, Marx affirms, ‘is the pimp between need and object, between life and man’s means of life’. It is our taskmaster, our ‘visible divinity’, and so we routinely ask whether things are ‘cost effective’ or offer ‘value for money’. Everything must be expressed and rationalised in economic terms.
Today the most dramatic result of this victory of economic reason is the stark exacerbation of income inequality, which Thomas Piketty describes, in his landmark Capital in the Twenty-First Century, as a new Gilded Age. While most economic research on inequality focuses upon income obtained through labour, Piketty shows that the uneven distribution of income derived from capital is also a key factor. Since the 1970s capital has been increasingly concentrated in the hands of the few—not only in the hands of rentiers, whose income from their capital holdings has risen faster than income derived from labour, but in the hands of corporate managers who receive astronomical compensation packets, or ‘supersalaries’.
Even after the 2008 meltdown, the corporate profits out of which these managers are paid have returned to extraordinary levels, even as wages, ‘including the wages of the highly educated’, as Paul Krugman notes in After Piketty, a recent collection of essays on income inequality by a range of influential economists, ‘have stagnated’. Piketty argues that the gap between r (the rate of return on capital) and g (the rate of economic growth) widens as economic growth slows, since r (he predicts) falls less quickly. This would induce a further distribution of income towards those with capital holdings and away from those dependent on proceeds from labour. And as Krugman reports, ‘real wages for most U.S. workers have increased little if at all since the early 1970s, but wages for the top one percent of earners have risen 165 percent, and wages for the top 0.1 percent have risen 362 percent.’ In historical terms, Piketty sees the period following the two world wars up to the 1970s, when the ratio of capital to income decreased, as an anomaly, and expects the wealthy to consolidate their power through the capacity of inherited wealth to ‘devour the future’. The accumulation of capital among a tiny minority will generate nineteenth century levels of income disparity, and hence ‘a drift toward oligarchy’, unless a more robust system of progressive taxation can close the gap.
After Piketty represents progress of a kind for the discipline, since it addresses an issue it usually neglects. Yet the collection itself betrays a lack of reflection among professional economists to see what their modes of thinking are doing in the world—an unwillingness to question whether their theories benefit those who dwell in it. Never mind whether the knowledge the discipline produces is beneficial or challenges the system: what matters is that production continue. Marshall Steinbaum remarks in the Boston Review that ‘as an appeal to the public to resolve, or at least have a say in, what the experts consider their own domain, Piketty appears to have questioned the very value of having a credentialed economics elite empowered to make policy in the name of public interest but not answerable to public opinion.’ Small wonder that these economists don’t engage with this implication of his work. Instead, the engagements are largely technical and self-interested, even when exegetically acute, as are the essays by Elisabeth Jacobs, Paul Krugman, Emmanuel Saez, Robert M. Solow, and Arthur Goldhammer. This gets to the heart of the disciplinary disconnect to which the book under review, The Econocracy: On the Perils of Leaving Economics to the Experts, is a timely response.
Though economically trained, the authors of The Econocracy are recusants from the academic discipline. Their dissenting critique of the field casts doubt on the purchase of economic theorisation on reality, while highlighting the undemocratic influence of economic experts—including the authors of After Piketty, who have sworn allegiance to the theoretical framework that The Econocracy disparages.
Employing the suffix –cracy to denote a prevailing form of power, influence, or rule, econocracy denotes governance by economic priorities and economic expertise. The fuller definition formulated in the book describes ‘a society in which political goals are defined in terms of their effect on the economy, which is believed to be a distinct system with its own logic that requires experts to manage it’. Its key consequence, with adverse effects on public trust in institutions and expertise alike, is that ‘citizens increasingly live in a world that they cannot shape’. For all the chatter about liberal democracy, few are privy to the technical economic language into which the world has been translated. Lacking understanding of basic economic terminology, ‘disempowered and disenfranchised’ citizens are from the outset excluded from the decisions that shape their lives. Political choices are portrayed as economic technicalities requiring experts to solve them. Decision making has been outsourced to economists because they ‘can make special claims to knowledge’. After all, an econocracy by definition values economic knowledge ‘above all else’.
From the Second World War onwards, enhanced data collection techniques made possible new conceptions of the economy: an abstraction used to denote a self-contained system. So today, as Earle et al. note, the economy is perceived as a ‘distinct sphere of life’ comprising all activities related to ‘production, distribution, and consumption’ between ‘individual economic units’. This reinforces the perception that economics holds the key to political comprehension. Indeed, the authors of The Econocracy felt compelled to read economics as undergraduates because they had noticed the extent to which the world around them was shaped by its vocabulary, and how frequently politics came down to questions of economic expediency. Reasonably enough, they thought it might be useful to learn something of this mysterious nomenclature with which people’s lives could be so drastically transformed.
They discuss how economists espouse an ideological orthodoxy established over many decades, one that resolved to produce a common theory with which to investigate a ‘system’ that has, apparently, its own ‘logic’. The conceptual repertoire of ‘neoclassical’ theory includes individualism (focusing upon the behaviour of atomised agents who compose the economy); optimisation (the supposition that agents are always seeking to better their advantage); and equilibrium (that individual decisions must eventually balance as a whole). The theory typifies a technocratic culture that likes to ensure life can be crammed into and preferably reduced to narrow systems of notation (for example, the prevalence of ranking systems at every level of education). Consequently, the value of what is measurable in this culture is increasingly amplified at the expense of what is not. From the 1930s, economists began producing macroeconomic models of the economy that were limited to addressing human relations in an abstract way, detached from the underlying conditions that make them possible. The inclusion of unstable, ambiguous or unpredictable factors would otherwise damage the veneer of scientific credibility to which economists aspire. As Earle et al. point out, their guiding assumption that the economy is ‘characterised by knowable, predictable forces—underpinned by the certainty of optimisation and equilibrium—means that economic experts believe that they can model a situation, often mathematically, to make a prediction of how some policy will affect the economy’. Economic variables are assumed to engage in ‘fixed, mechanical relationships’. Tellingly, the discipline doesn’t bother asking if the economic goals set up in its models are worth achieving.
In their most damning chapter, ‘Economics as Indoctrination’, Earle et al. dissect what passes for an economics ‘education’ based upon a curriculum review of 172 economics modules from seven universities: Belfast, Glasgow, Exeter, Cambridge, Manchester, Sheffield, and the London School of Economics. They initially approached 16 institutions, but the others either refused the data or were too late in supplying it. Analysing the module course outlines and past exam papers, they discovered that in economics, the (theoretically constructed) world is already understood. Answers to questions are already extant: one need only imbibe them. Through the predominance of rote forms of assessment where students dutifully ‘operate a model’ or fill in multiple-choice questionnaires, critical thinking is barely enabled. (In fact, evaluative questions that require critical thought comprise only eight percent of the available marks in core examinations in the sampled institutions.) Even more startling is the ‘eviction of the real world’ from the seminar room: to obtain their degree, students are not even required to understand, for example, ‘the causes and consequences of the 2008 crash’—surely an unconscionable omission. Students are generally led to believe that other ways of thinking about economics are either non-existent or debunked, and that the discipline has progressed to a state of consensus in its basic principles.
In response, Earle et al. outline a multitude of different economic perspectives (‘Old’ neoclassical; ‘New’ neoclassical; Post-Keynesian; Classical; Marxist; Austrian; Institutional; Evolutionary; Feminist; Ecological), each of which start from different premises and have the capacity to shape both what economists value and the type of decisions they make. For instance, while the ‘New’ neoclassical perspective considers the economy to be ‘stable in the absence of frictions and shocks’, a Marxist perspective considers it ‘both volatile and exploitative’, whereas an Ecological perspective considers it ‘embedded in the environment’. ‘Conventional economics’, they say, ‘takes growth, efficiency and individual utility as focal points of analysis’, but the decision to emphasise these criteria are the result of value judgements, not scientific evidence. Based on one’s theoretical approach, one might easily choose to employ alternative criteria by which to judge economic performance, such as ‘stability, sustainability and innovation’. Perhaps most astounding of all, in most departments the environment is ‘virtually absent from basic economic analysis’, hence students graduate with little to no understanding of the inextricable link between the economic system and the current climate crisis.
The limitations of neoclassical orthodoxy are again exposed when it comes to the 2008 crash, which in the authors’ estimation ‘represented a failure of economic ideas’. Fixated on ‘consumer inflation, GDP and unemployment’ as the key measures of economic stability, macroeconomic models and the forecasts based upon them proved impotent because they hadn’t included ‘exogenous’ factors like the housing market, the financial sector, or ‘government and central bank policy’. No wonder the economic models of the so-called ‘top’ economists provided no warning of what was to come, nor any salvation afterwards. Yet had they more seriously considered the economy from a Post-Keynesian perspective (e.g. that human beings ‘use rules of thumb’ rather than merely ‘optimise a variety of goals’; that financial crisis is ‘generated by financial markets’ rather than caused by ‘exogenous shocks’ to them, and so forth) they might have been more inclined to recognise ‘the importance of the financial system and the general instability of capitalism’. Unfortunately, the authors report that only 17 out of the 172 modules analysed even mention ‘non-neoclassical economic perspectives, while Cambridge University does not mention them at all’. Such narrow thinking and lack of critical re-evaluation of the discipline’s most cherished premises—clinging to its self-image as a supposedly ‘unified field’—is only likely to increase the possibility of future disaster.
Readers may legitimately conclude that the failures of economists have less to do with imbecility, and more to do with the limits imposed by disciplinarity. John Locke long ago chided the narrow specialist, whose provincial training foments intellectual blindness. Specialisation, and the deference to authority and convention it requires, produces creatures of habit, essentially predictable in their intellectual tastes. They ‘talk with only one sort of men, and read only one sort of books, so that they are exposed to only one sort of notions’. These bookish adepts ‘carve out for themselves a little province in the intellectual world… They have an agreeable commerce with known correspondents in some little creek; they confine themselves to that, and are nimble enough managers of the wares and products of the corner of the intellectual world with which they content themselves.’ Usually this results in the myopia of ‘scholastic epistemocentrism’, as Pierre Bourdieu calls it: that is, ‘imputing to its object what belongs in fact to the way of looking at it’.
Certainly economics is an exclusive intellectual fiefdom, not unlike philosophy and the physical sciences. These too are cloaked in esoteric jargon. Yet some scientists alter the world with their discoveries; some philosophers with their ideas. What makes economists different? Because ‘economics affects everyone’. It already prevails. That’s the realisation that appears to motivate The Econocracy: economists have power; we don’t. More like clerics than mere experts, their system of reality predominates because economics already predominates as a system for producing reality. Thus economists help ensure the dominant ideas remain economic ideas; that the dominant concerns remain economic concerns. Economists, logically enough, are considered best placed to know what will work in the interests of the economy. But the present situation begs the question: do economists merit this power?
To answer, another question needs addressing: is their knowledge adequate to the reality they seek to comprehend? The Econocracy suggests not. Still, any answer to that question would itself depend on another, which The Econocracy evades: is the economic colonisation of human thought and behaviour itself desirable? If not, then doesn’t the predominance of economics and economists entail the mastery of illusion? Doesn’t it advance only the illusion of epistemological adequacy, the mere projection of disciplinary competence? If the economic system of production is ecologically and ethically bankrupt—and evidence abounds that it is—then the fact that economists persist in maintaining this system can only be an affront to the intellectual integrity experts are supposed to display.
Being a specialist or expert—in any field—is supposed to project an image of competence based on verifiable evidence of competence. In questioning this, The Econocracy is in essence an exercise in the deflation of economic expertise. If its argument is right, then we have little reason to believe that economists are bona fide experts, let alone ones we should leave to their own devices. So what we need, the authors claim, are better economic experts: humbler, more accountable, and possessed of a sense of duty to the public, who ideally would delegate their powers to them. Earle et al. still ‘believe that experts are a vital part of the modern world’, and that their role should be ‘to inform citizens of their choices rather than make those choices for them’. Apparently, becoming a society of ‘citizen economists’, exerting pressure on policymakers through ‘Citizens’ Policy Groups’, holds out the hope of public influence over what sort of economy we want.
The practicalities of this are doubtful: it is still the discipline that sets the terms of economic debate and produces the very knowledge citizens would supposedly need to master. It also neglects the question of how to wield such knowledge where it matters most. Acquiring economic knowledge is one thing; accessing or influencing the lofty clique of economic experts appointed to advise on government policy is quite another. The sceptic may rightly doubt its feasibility. Who has time and resources to become genuinely conversant in economic terminology anyway (let alone the quantitative capacity to develop alternative economic models)? In any case, wouldn’t the collective acquisition of economic knowledge only further consolidate the reign of economic reason? Surely it would only reinforce the primacy of economics over our lives. And isn’t that the problem?
The philosopher and economist Cornelius Castoriadis once expressed a hope for ‘a society in which economic values have ceased to be central (or unique), in which the economy is put back in its place as a mere means for human life and not as its ultimate end’. If these latest books demonstrate anything, it is that this hope remains forlorn. Ratcheting up the importance of economic knowledge and placing it in the hands of an unaccountable elite has left the uninitiated powerless. The legitimacy of this elite is increasingly exploded, but their power remains. How to retrieve it remains our present and future quandary.
ABOUT THE AUTHOR
Alexandre Leskanich read history, philosophy, and political theory at the universities of Leicester, Edinburgh, and The London School of Economics and Political Science. He is currently a PhD student in the School of Modern Languages, Literatures, and Cultures at Royal Holloway, University of London. He has previously written for The Hong Kong Review of Books, The LSE Review of Books, The Oxonian Review, and Rethinking History: The Journal of Theory and Practice.
First published in 3:AM Magazine: Wednesday, July 25th, 2018.